The 16th Amendment to the German Foreign Trade and Payments Ordinance entered into effect on October 28, 2020, the third step in the German government’s efforts to tighten its foreign direct investment review regime in 2020.
Earlier this year, Germany took action in aggravating its foreign direct investment (FDI) screening regime. First, the German government amended the Foreign Trade and Payments Ordinance (Außenwirtschaftsverordnung (AWV) in light of the coronavirus (COVID-19) pandemic by defining certain infectious disease–related businesses as critical infrastructures. Second, the German legislator updated the German Foreign Trade and Payments Act (Außenwirtschaftsgesetz (AWG)), incorporating in particular a consummation prohibition and a gun-jumping regime subject to criminal fines for acquisitions of certain particularly security-relevant businesses, and aligning the AWG with the EU FDI Screening Regulation, which became effective as of 11 October 2020.
The 16th Amendment to the AWV is mostly limited to making the necessary technical changes aligning the government ordinance, i.e., the AWV, with the law, i.e., the AWG. Other than expected and announced previously by the German government, the amendment does not expand the catalogue of critical infrastructures subject to FDI screening, leaving out, in particular, artificial intelligence, robotics, semiconductors, biotechnology, and quantum technology.
These categories were left out of the ordinance in this round not due to changes in policy, but rather due to timing constraints the government faced from the necessary alignment with the EU FDI Screening Regulation, which became effective on October 11, 2020, and the consultation with public stakeholders on the introduction of these categories required under German law. Thus, it can still be expected that these sectors will be included in the next update of the AWV in 2021 once the relevant stakeholders have been consulted.
Once these sectors are included in the catalogue of critical infrastructures of the AWV, acquisitions of at least 10% of the shares or assets of a German-domiciled entity operating in these sectors by a non-EEA investor would be subject to a mandatory filing obligation. We will continue to monitor developments in this respect.